Strategies, Challenges, and Answers

One Minute Closer To High Noon

CumisA Nevada Law Blog post recently compared an iconic wild-west film showdown to an upcoming showdown at the Nevada Supreme Court.   The showdown will decide whether the Court will impose Cumis-type obligations on Nevada insurance companies where an assigned defense panel counsel faces an irreconcilable conflict between the interests of the insurance company and those of the policyholder.  An order just issued by the U.S. District Court, District of Nevada shows that this high noon showdown about legal ethics will happen much sooner than anyone had imagined.

As reported HERE, Judge Miranda Du of the U.S. District Court, District of Nevada previously found that State Farm owed a duty to its policyholders to pay for a Cumis-type attorney.  Hansen v. State Farm Mutual Auto. Ins. Co., Case No. 2:10-cv-01434 MMD RJJ, 202 WL 6205722 (D. Nev. Dec. 12, 2012).  At the time the prior blog post was written, the Nevada Law Blogs assumed that the Hansen case would continue toward resolution in the federal court and that the Cumis issue would eventually wend its way to the Nevada Supreme Court via another set of facts in a different case.

However, State Farm recently convinced Judge Du to reconsider and withdraw her prior order and then certify the Cumis question to the Nevada Supreme Court.  See Hansen v. State Farm Mutual Auto, Ins. Co., Case No. 2:10-cv-01434 MMD NJK (D. Nev. Nov. 19, 2013).   In her recent order, Judge Du acknowledged that the Nevada Supreme Court had not previously adopted or applied the Cumis standard and since Nevada law controls the case, the Nevada Supreme Court should be first to decide the question.

In her Order, Judge Du certified the following two questions:

1.  Does Nevada Law require and insurer to provide independent counsel for its insured when a conflict of interest arises between the insurer and the insured?

2.  If yes, would the Supreme Court find that a reservation of rights letter creates a per se conflict of interest.

The Order further recognized the inherent authority in the Nevada Supreme Court to rephrase the questions as it sees fit.  See Palmer v. Pioneer Inn Assocs., Ltd., 118 Nev. 943, 945 56 P.3d 1237, 1238 (2002).

Looking at the timeline on other cases involving questions that have been certified from the U.S. District Court to the Nevada Supreme Court, the process could take between eight month to one year.  The case is styled State Farm Mut. Auto. Ins. Co. v. Hansen, Nevada Supreme Court Case No. 64484. So be sure to follow the Nevada Law Blogs to learn how this showdown play out before the Nevada Supreme Court.  In the meantime, if you have questions about how to deal with a Cumis-type situation, please contact Mike Mills at Mills & Associates, 702-240-6060 x114 for advice.

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